The AB=CD pattern is easy to identify on charts and consists of 2 equivalent price legs. It has specific Fibonacci
measurements of each point within its structure, eliminating room for flexible interpretation. The C point must retrace to either a 0.618 or 0.786 and the BC projection is either 1.27 or 1.618. When the BC projection and the AB=CD completion converge closely and define a small area, the chance of a reversal increases.
The first target would be the 382 retracement of AD and the second target the 618 retracement of AD. A common stop level is behind a structure level beyond the D point. Conservative traders may look for additional confirmation before entering a trade, for instance an aligning RSI
value or a specific candlestick
pointing at a reversal. TradingView has a smart ABCD Pattern drawing tool
that allows users to visually identify this pattern on a chart. There are several variations, based on CD being an extension of AB such as the 1.27 AB=CD or the 1.618 AB=CD pattern.